Increased Defense Spending Research Articles

Japan in 2023

This year saw efforts by Japan’s government, led by prime minister Fumio Kishida, to tackle problems such as the need to arrest the declining birthrate, increase defense spending, deepen security ties with the US and other nations, and safeguard the rights of sexual minorities. Yet despite being in an enviable position domestically, with no national election looming, a decimated opposition, and a coalition partner with the votes to underwrite his administration, Kishida was unable to rally the public behind a tax hike to fund defense spending. Japan’s prime ministers remain sensitive to public opinion, likely due to the precariousness of their position as leader of the Liberal Democratic Party rather than electoral considerations.

ECONOMIC SECURITY OF UKRAINE DURING MILITARY OPERATIONS: CHALLENGES AND WAYS OF COUNTERACTION

The article focuses on analyzing the state of economic security of Ukraine during the military operations. It identifies key challenges directly impacting the country's economic security and explores potential ways to overcome them. 
 The analysis established that the current state of the economic system of Ukraine was formed under the influence of destructive external and internal challenges that pose threats to economic security. The challenges associated with the protracted war remain crucial for Ukraine.
 The article highlights the challenges that threaten the economic security of Ukraine's external security environment such as high dependence of the domestic economy on foreign borrowings, deteriorating financial conditions of the export-oriented production sector, and inadequate government responses to conflicts in political, economic and social realms. There are still threats to the amount and timing of external financing for the state budget, and logistical difficulties are a significant risk, which negatively affects export earnings and the economic security of the state.
 Internal threats include high level of corruption in public authorities; ineffective control over compliance with the law; inefficient use of state and local budgets; relatively high level of shadow economy.
 The author substantiates the priority directions and ways of counteracting the challenges and threats to Ukraine's economic security during military operations. Ensuring the economic security of the state in a military conflict requires flexibility, predictability, and an integrated approach that includes social, economic, and defense aspects of national security. Key priorities include ensuring food security, supporting crucial economic sectors, especially those important for defense and essential goods production, implementing policies for financial aid from international partners, transparent and effective use funds received from international partners, implementing a policy to increase defense spending

Analysis of world military expenditures on production and armaments in the context of modern geopolitical threats

Geopolitical threats and military conflicts in the first quarter of the 21st century have led to changes in the structure of countries' expenditures, with an increase in defense spending on production and armaments, as well as financial support for humanitarian, economic and military needs of the warring countries. The main reason for the increase in military spending in the world is the russian-Ukrainian war, the Israeli-Palestinian conflict, and other geopolitical risks in the Middle East and Taiwan. The growth of these risks encourages countries to increase defense spending, which further complicates the issue of financing socially important and public initiatives. It has been established that global military spending tends to increase during 2015–2023. Last year's military expenditures amounted to up to $2,240 billion, and this figure is the highest of the analyzed periods. Among the world's regions, such as North America, East Asia, Oceania, South Asia, and Europe, there is an increase in defense spending. The only region where military spending fell in 2022 was Africa, due to natural disasters and catastrophes within the region. The share of country expenditures in the structure of global defense spending has increased in countries such as the United States, China, russia, Saudi Arabia, and India. The United Kingdom, France and Japan are maneuvering in almost the same amount of spending during 2015–2023. There is also a trend in the countries of the former Eastern Bloc states, which have been increasing their spending since 2014, after the occupation of Crimea. Military and humanitarian support for Ukraine from Western partners remains a key necessity for deterring the russian aggressor, but the plan for the supply of equipment and weapons does not cover all possible needs of Ukraine, which leads to the search for other ways to maintain the country's military defense capability.

A Comparison of the Macroeconomic Effects of Increased Defence Spending in Poland and Germany

The aim of the article is to quantify and compare the macroeconomic effects of defence spending in the Polish and German economies. Estimating these effects is of particular importance in the context of the substantial increase in defence expenditures in Poland and Germany resulting from the war in Ukraine. The research is based on a dynamic stochastic general equilibrium model that takes into account both demand‑side and supply‑side mechanisms. The impulse response functions calculated based on the models estimated for the two economies show that the impact of defence spending on GDP is much stronger in Poland than in Germany. Furthermore, the empirical results indicate that in the Polish economy, defence spending also stimulates labour and consumption to a greater extent than in the German economy.

International Transmission of Fiscal News Shock: Evidence from Defense Spending

ABSTRACT This paper proposes a novel fiscal news shock transmission channel from the US to Canada. The US and Canada have a long history of strong political and economic ties. This high degree of economic and political interdependence between Canada and the US makes the Canadian economy sensitive to policy changes in the US. We demonstrate that a fiscal news shock originating from a significant increase in US defense spending can directly transmit to Canada through enhanced defense spending in Canada. We construct a transmission model containing the defense spending news variable to assess the transmission of a fiscal news shock through this novel channel. Our findings suggest that news about increased US defense spending induces Canadian defense spending to rise. Consequently, this increased defense spending has a positive impact on the Canadian GDP. The estimated international fiscal multiplier for Canada is 0.11. We coin a novel fiscal multiplier labeled as the international defense multiplier, which quantifies the response of defense spending of a country due to a change in defense spending in another country.

The Relationship Between Military Service and Legislative Behavior for U.S. Representatives in Recent Congresses

Military veterans serving in the U.S. House of Representatives during the 113th–115th Congresses (2013–2019) exhibited distinct legislative behavior on selected defense-related topics compared with their nonveteran colleagues. Examining 208 House roll call votes on issues salient to military veterans in which more than 90,000 individual Representative votes were cast as well as by categorizing more than 19,000 bills sponsored, this study finds that there was a small but distinct veteran voting trend that opposed Global War on Terrorism (GWOT) troop reductions. In addition, younger members exhibited a trend that suggests future Congresses may be more willing to approve use of military force than in previous decades. Finally, this study empirically demonstrates the tension in conservative fiscal policy preferences between increasing defense spending versus restraining total government expenditure.

European Defence Policy: Prospects and Challenges

ABSTRACT European defence policy offers opportunities for spending more and better where better achieves more from existing resources. Increased defence spending needs to be justified by the threats to Europe which have to be identified and defined. Higher defence expenditure usually focuses on inputs rather than final outputs in the form of greater peace, protection, security and the safety of a nation’s citizens. The task is to show the opportunities for applying economic analysis to the complexities of European defence policy and collaborative defence projects. Economic efficiency criteria identify the contribution of final outputs, substitution and competition to the formulation of European defence policy, but the final outcomes are likely to be determined by military-political factors rather than economic efficiency criteria. The paper provides a critique of European defence policy.

Japan’s new national-security and defence strategies

Japan’s release in December 2022 of three transformational strategy documents signalled its intent to adopt a new approach in the coming years to national-security and defence issues. The National Security Strategy pledges to increase defence spending from roughly 1.0% of GDP to 2.0% by the fiscal year beginning in 2027. The documents also call for Japan’s armed forces to acquire counterstrike missile capabilities and launch new efforts to overcome the civil–military divide that has long undermined Japan’s defence sector by hindering the development and adoption of new capabilities.

Free Riding, Network Effects, and Burden Sharing in Defense Cooperation Networks

AbstractHow do states distribute the burdens of collective defense? This paper develops a network theory of burden sharing. We focus on bilateral defense cooperation agreements (DCAs), which promote cooperation in a variety of defense, military, and security issue areas. Using a computational model, we show that DCA partners’ defense spending depends on the network structure of their agreements. In bilateral terms, DCAs increase defense spending by committing states to defense activities and allowing partners to reciprocally punish free riding. However, as a state's local network of defense partnerships grows more densely connected, with many transitive “friend of a friend” relations, DCAs have the countervailing effect of reducing defense spending. The more deeply integrated states are in bilateral defense networks, the less they spend on defense. We distinguish two potential mechanisms behind this effect—one based on efficiency improvements, the other on free riding. An empirical analysis using multilevel inferential network models points more to efficiency than to free riding. Defense networks reduce defense spending, and they do so by allowing countries to produce security more efficiently.

Inertia and Reactiveness in Germany's Russia Policy

Abstract Despite signs that Russia was preparing an invasion of Ukraine, the newly elected German government stayed with pre-existing approaches that involved engagement and the threat of limited sanctions. However, in February 2022, just before the invasion began, Germany blocked the Nord Stream 2 pipeline system, announced weapon deliveries to Ukraine, and massively increased defense spending. This article shows that inertia and reactiveness heavily influenced the timing, nature, and extent of this massive shift in Germany's Russia policy. German leaders continued the existing policy in part because it had been formed by still influential figures and was in line with societal views. However, at the dawn of the invasion, the failure of previous policies had become undeniable, pressure from Ukraine and nato allies peaked, and societal views finally shifted. Reacting to this untenable situation, key figures in the German elite pushed through a series of measures that nato allies and Ukraine had long demanded.

Introduction

Introduction

Geopolitical risk and the returns and volatility of global defense companies: A new race to arms?

The ongoing war in Ukraine and rising geopolitical tensions between Russia and western countries have led several European countries to increase defense spending to historic levels. Under such intense circumstances, we examine the co-movements between the daily geopolitical risk (GPR) index and the daily returns and volatility of 36 global defense and aerospace companies covering ten countries and three continents. Using the wavelet coherence approach, we find significant co-movement concentrated around the eruption of the war in Ukraine, mostly for medium and longer scales, indicating a flight-to-arms phenomenon. The strong co-movement is significant for most of US and European companies. Specifically, the GPR index leads the return and volatility of several US and European companies at medium and longer scales throughout the war period, and its impact is mostly positive. Our findings offer new and interesting implications for multi-horizon market participants such as traders and investors.

Challenges for Cooperation of Participating States in the Bucharest Nine Format under the Conditions of the Evolution of the Security Threats on NATO's Eastern Borders.

The article reveals the challenges for cooperation of the participating states in the Bucharest Nine initiatives in the conditions of the evolution of security threats on NATO’s eastern borders. The preconditions, purpose and goals of the Bucharest Nine have been highlighted. The group composition of B9 participants on a territorial basis has been considered, namely: the Baltic countries (Estonia, Latvia, and Lithuania), the Visegrad Four countries (Poland, Slovakia, Hungary, and the Czech Republic), and the Black Sea countries (Bulgaria and Romania). The organizational structure of such a regional format within NATO has been represented. The goals of the Bucharest Nine have been concretized both in the Euro-Atlantic dimension and in the regional one, especially in the region of Central and Eastern Europe. The focus is on the resilience and solidarity of B9 member states in their approaches to guaranteeing the European security architecture, including increasing defense spending and its dynamics, supporting Ukraine and its territorial integrity, as well as assessing threats from the russian federation. The current challenges for the development of the B9 initiative have been highlighted, the key ones being: restrained attitude towards the russian policy in the CEE region; various preconditions for action to increase military capabilities; the position of some Western NATO member states on B9 as a pro-American project, etc. It has been concluded that it is expedient to establish B9 format initiatives within NATO in order to “strengthen the voice” of less powerful states in the conditions of transforming the security architecture in the global dimension, mainly in the context of growing military threat from the russian federation in the CEE region.

Limitations of Military Power to Counter a Rising China

Research finds that a heavy reliance on unaccompanied military deterrence with China is an ineffective solution. The U.S. lacks the requisite industrial power to replicate the winning conditions of its victory in the Pacific during World War Two. Untried developments in military technology create an unacceptable level of uncertainty at the outset of a conflict between two major powers. The study concludes that a more multidimensional approach must be increasingly emphasized by the U.S., incorporating other instruments of national power. The U.S. must increasingly foster security partnerships with allies, rely on the normative pressures from the international community via institutions, and adjust the form and focus of its own military to optimize the efficiency of existing forces without resorting to increased defense spending. Lastly, the U.S. must find common ground with China, reversing feelings of alienation and bullying that influence China to disregard the concerns of other nations.

Conditions influencing the change of defense budgets - the case of Lithuania

During the so-called Cold War the financing of the defense budget was widely discussed. The issue of financing the defense budget was widely discussed during the arms race. Since the end of the Cold War, armed conflicts have become more complex, and their causes are even more diverse than during the Cold War. They were caused by the deterioration of inter-ethnic divisions, hybrid and cyber wars over energy resources and the activities of terrorist groups. Due to the changing security dimension, a new study was conducted examining the determinants of defense spending in a changing security environment: the creation of new islands in the South China Sea to expand China’s military-political power in the region; the possibility of using North Korea's nuclear energy. weapons, Russia’s military maneuver in the conflict in Ukraine, its naval operation in the Black Sea, the occupation of Crimea, military operations in Syria, a change in U.S. military doctrine. The state that has spent the most military spending is returning to the creation of large military units, and to do so, the country needs to increase defense spending. Looking at how these world events work, we see one component that connects them. Strong force, expressed in military action, is used to achieve their political goals. Military power is gaining more and more influence in the formation of foreign policy, therefore the defense budget, as an instrument of foreign policy expressed in military power, is becoming an increasingly relevant object of research. Lithuania's defense budget is not as important to world politics as the United States, China or other major countries in the world, but it is relevant and significant in its region. Expenditures on the Lithuanian military budget began to increase significantly by two thousand and fourteen. It can be argued that the factor that has now influenced cost growth is Russia’s military aggression in Ukraine. Nevertheless, in 2008 Russia's aggression in Georgia did not affect the growth of Lithuania's defense budget. 2008 The economic crisis may have influenced Lithuania's decision not to increase military spending. Some pressure on the country's defense budget is also related to the 2020 Pandemic crisis. The question arises as to why seemingly similar conflicts affect Lithuanian political decisions differently.

The Relationship between Defense Expenditures and Employment in NATO Member States: Bootstrap Panel Causality Test

In recent years, global tensions, geopolitical risks, political crises, regional conflicts, and wars have played an important role in the increase of defense expenditures of countries. The economic effects of increased defense spending have become one of the frequently discussed topics. The aim of this study is to examine the causal relationship between defense expenditures and employment rates in 18 NATO member countries. To this end, the relationship between defense expenditures and employment rates were analyzed using the Kónya (2006) Bootstrap Panel Causality Test in the post-Cold War period. According to the findings from the 1991-2018 period, a causality relationship was found in 5 of the 18 countries in the panel from defense expenditures to employment, and in 3 of the 18 countries from employment rates to defense expenditures. Thus, it seems impossible to make a general inference about the causality relationship between defense expenditures and employment in NATO member countries.

Transformation of the US Federal Budget Expenditures on National Defence for the 2017-2022 financial years

The article features a brief evaluation of the US military power based on the current level of expenses on defense. A multifaceted analysis of the structure of the US military budget and its transformation during D. Trump’s and J. Biden’s administrations is presented, as well as its potential impact on the national debt and budget deficit of the US. The article argues that military spending remained a priority in federal budget expenses during Trump’s presidency and continues to remain one of the most crucial budget priorities for J. Biden’s administration. The US reallocations of the military budget towards such expenses as “Research and Development” “Operation and Maintenance” which the Trump administration put into action allowed to continue the process of optimizing military forces to increase its combatant efficiency while limiting the burden of these expenses on US economy. The same practice is being conducted by J. Biden’s administration. The course of cutting taxes, while increasing defense spending during D. Trump lead to a 5-times increase of the budget deficit and a significant increase of the national debt, its 5 year payments will likely exceed the size of the US defense budget. The author concludes that Joe Biden’s administration is facing a challenging objective of supporting the economy's recovery after the Covid-19 pandemic and stabilizing the federal budget deficit, as well as national debt level.

Rethinking U.S. National Security after Covid19

Abstract The United States has traditionally defined national security in the context of military threats and addressed them through military spending. This article considers whether the United States will rethink this mindset following the disruption of the Covid19 pandemic, during which a non-military actor has inflicted widespread harm. The author argues that the US will not redefine national security explicitly due to the importance of the military in the US economy and the bipartisan trend toward growing the military budget since 2001. However, the pandemic has opened the floodgates with respect to federal spending. This shift will enable the next administration to allocate greater resources to non-military threats such as climate change and emerging diseases, even as it continues to increase defense spending to address traditionally defined military threats such as hypersonics and cyberterrorism.

Conciliating International Defence Spending Targets and National Objectives

Most NATO nations remain under pressure to increase national defence budgets, although this would be unlikely to improve significantly the Alliance response and deterrence capability. In the context of likely post-COVID 19 fiscal constraints, pressure should shift to meeting existing personnel requirements and increased participation towards more targeted and efficient contributions, along the lines of the “four-thirties” plan. While Canada has committed to increase defence spending with a view to continue to be a valued NATO partner as well as a committed international actor in uncertain times, the Canadian defence budget also balances responsibilities at home and in North America. While the larger countries will continue to assume the bulk of burden-sharing, unity, purpose and resilience of NATO will outweigh smaller country commitment to defence spending against GDP.

Шляхи створення, підтримання та нарощування воєнно-економічного потенціалу держави

Стаття є цікавою для фахівців, як в економічній так і в оборонній сферах, які займаються дослідженням питань щодо забезпечення воєнно-економічних потреб держав, як в мирний, так і у воєнний час. Метою статті є визначення місця воєнно-економічних потреб в загальній структурі потреб держави та країни в цілому. Поставлене наукове завдання вирішувалося шляхом визначення сутності, структури та динаміки змін воєнно-економічних потреб держави. В процесі досягнення мети дослідження використані наступні методи наукового пізнання: аналізу, синтезу, індукції, дедукції, системного підходу, історичної аналогії. Проведений аналіз джерел свідчить, що питанням оцінки воєнно-економічного потенціалу та забезпеченню воєнно-економічних потреб держав у світі приділяється все більше уваги. На думку авторів це пов’язано зі збільшенням загальних світових оборонних видатків і як наслідок сукупної світової воєнної могутності. В статті наведено структуру воєнно-економічних потреб, їхню динаміку у часі, їхній вплив на розвиток воєнної економіки країни. Показано залежність воєнно-економічних потреб від воєнно-економічного потенціалу держави та сформовано основні заходи державного рівня, які безпосередньо впливають на рівень воєнно-економічного потенціалу держави.